Equity firm to discuss taking BJ's Wholesale private

LOS ANGELES – After building a 9.5% stake in BJ's Wholesale Club Inc., the private equity firm Leonard Green & Partners LP is considering making an offer to take the wholesale club operator private.

In a filing with the Securities and Exchange Commission on Thursday, Leonard Green reported beneficially holding 5.1 million BJ's shares, including those underlying call options, and said it believes the stock is undervalued.

The firm said it plans to talk to BJ's management about options for enhancing shareholder value, including taking the company private or employing such financing schemes as mortgage or sale-leaseback deals.

BJ's has declined to comment on the SEC filing. The news of a potential buyout hoisted the retailer's stock price Thursday, with its shares rising more than 14% to $43.54.

In mid-May, BJ's reported better-than-expected results with its first-quarter earnings growing by 7.4% on increased sales and membership fees. It also raised its earnings view for the entire year.

The initial half of 2010 has seen a resurgence of private-equity deals as the markets recovered and banks began lending again. However, most of this year's buyouts have been relatively small, ranging between $1 billion and $4 billion. BJ's market capitalization is $2.25 billion.
Several analysts said that taking BJ's private would make sense. It is the smallest player in the club segment, they note, and has room to grow outside the East Coast.

"At some point, [BJ's] will see improved productivity and lower operating costs," Janney Montgomery Scott analyst David Strasser wrote in a note to investors. "These trends make [BJ's] attractive to private-equity investors, especially in a recovering economy."